North Korea business park keeps running despite tensions

PAJU, South Korea (Reuters) - North Korea has torn up the armistice that ended its 1950s conflict and shut down a humanitarian hotline with the South, but one project keeps operating at full swing -- an industrial park run with the South on its own side of the world's most heavily militarized border.

The Kaesong industrial zone, home to 123 South Korean companies making basic goods like clothes, shoes and household items and employing more than 50,000 North Koreans generated over $1 billion in exports to the South in 2012.

And it appears it will remain in place no matter what -- untouchable regardless of satellite launches and nuclear tests by the North or toughened U.N. sanctions against Pyongyang.

It's a vital lifeline for an impoverished country that barely has any economic linkages with the rest of the world. North Korea's trade with China was $5.93 billion in 2012, according to South Korean government figures.

"North Korean workers were joking that South Korea is not our match and now we have to fight against the United States," said Park Heung-jin, 47, a South Korean buyer of Kaesong-made shoes on a visit to the zone.

Kaesong is the sole remnant of South Korea's "Sunshine Policy" of engagement with North Korea that saw hundreds of billions of dollars poured into the country in a failed bid to stop it proceeding with its nuclear weapons program.

It is the one working symbol of a potentially unified Korea and one that neither government in Seoul or Pyongyang appears willing to pull the plug on.

UNTOUCHED DESPITE SANCTIONS

United Nations sanctions against North Korea that targeted its missile and nuclear programs and the bank accounts of its top leadership in retaliation for Pyongyang's third nuclear test in February left Kaesong untouched.

"Kaesong is viewed as the last resort. Shutting this down would be cutting off everything between North and South Korea," said Park Soo-jin, a spokeswoman for the Unification Ministry in Seoul.

Only South Korean workers and buyers interested in the park's goods can secure a permit to cross the border and 842 went across on Monday on a narrow road. Rare convoys take permit holders in and ship goods back and forth, under the watchful eye of soldiers from North and South Korea.

South Koreans who visited the zone on Monday said North Korean troops were wearing camouflage, but that consisted of handfuls of webbing and grass.

"There were more soldiers than usual but I think it was because today there were more vehicles coming in (to the South)," said Kim Soo-yeon, 30, a female worker at a clothing factory in the zone returning from her work.

South Korean data shows the average North Korean worker gets paid about $128 a month for working in Kaesong. They also receive snacks like instant noodles and choco-pies that they take home to their families in a country periodically subjected to food shortages, if not full-blown famine.

Kaesong remained open through previous spikes in tension. Most economic and aid links were cut in 2008 following the shooting of a South Korean tourist at a joint resort in the North.

Relations plunged further in 2010 when North Korea was accused of sinking a South Korean naval vessel, something it denies, and when it shelled a South Korean island.

"People who don't know the situation here may think that workers could be taken hostage, but the people working here know what North Korea thinks of Kaesong's significance so they have trust," said Park, the shoe buyer.

(Additional Reporting by Christine Kim and Jack Kim; Writing by David Chance; Editing by Ron Popeski)